Taxable Vapor: Washington Legislature Considers Taxing Electronic Cigarettes Like Tobacco Products

By Darren Smith, Weekend Contributor

In the seemingly endless hunger to tax everything under the clouds the Washington Legislature is considering placing a 95% wholesale tax on electronic cigarettes and supplies. Currently retail sales of e-cigarettes are taxed as ordinary sales tax where as tobacco products are taxed at the highest wholesale tax rate in the United States. 

Not to be pushed out of the tax racket, the various families at the state legislature are trying to make sure their interests are “protected”.

Washington law defines taxable items subject to tobacco taxes which are levied against products that contain tobacco products. Cigarettes are the highest taxed of all tobacco products but cigars are taxed at a much lower rate, and pipe tobacco at a different rate. Presently e-cigarettes are not subject to the wholesale tobacco taxes because they do not contain tobacco.When Washington raised wholesale cigarette taxes to the highest level in the United States several years ago, many cigarette consumers switched to two avenues to avoid the high tax rates. One was to start smoking what are referred to as “little cigars” which are essentially miniature cigars with filter tips on them. It did not take long for the Washington legislature to catch up with this and changed the law accordingly. Next came a cottage industry that came up where roll-your-own establishments having machines customers could use to roll their own cigarettes using pipe tobacco sold in house. Many businesses offering this service began to spring up as a pack of these cigarettes was less than half the price of regular cigarettes. But once again the legislature seeing loss of revenue changed the tax laws to go after this form of tax dodging and as a result most of those businesses closed.

So now that electronic cigarettes have come into play a great many “vapor shops” opened offering various products and demand has been quite large due to their lessened cost and smoke free nature. But it was not long before politicians saw the loss of revenue from people switching to the state favorite tobacco product of cigarettes to the wholesale tax free electronic version.

One has to ask at this stage what the real purpose of sin taxes is in Washington. Politicians claimed the high taxation levels were designed to lessen the number of smokers and provide money toward health care costs relating to tobacco usage. But here, there is no tobacco, only a device to vaporize gels containing nicotine. Would nicotine patches be next? It’s not so far fetched an idea. After Washington legalized and state regulated marijuana sales at huge tax rates, the legislature then went after the medical marijuana dispensaries to put them out of business. They claimed loss of tax revenue because medical marijuana dispensaries were not subject to the marijuana tax. Those with medical conditions, including cancer patients and numerous others who benefit from medical marijuana will likely have to go to retail recreational marijuana outlets and pay likely more than twice what medical marijuana sells for. So are nicotine patches next?

According to KING5 News which reported on testimony before the legislature, many e-cigarette customers and retailers were worried their interests might be snuffed out by the legislature.

“I pay my taxes very happily, but I feel this bill to be asinine,” said Tammy Brookins, manager at Olympia’s Volcano Vapor Cafe.

She fears that essentially doubling the cost of her businesses products could put Volcano Vapor out of business. She also says it could scare cigarette smokers from converting to what she believes is a healthier alternative.

“I feel like it saved my life,” testified Zach McLain, who said he no longer smokes cigarettes after changing to tobacco-free e-cigarettes.

One of the bill’s sponsors, Rep. Reuven Carlyle, D-Seattle, said the e-cigarettes should be taxed like a tobacco product because the vapors contain nicotine.

“This nicotine product is highly concentrated,” said Reuven, “It needs to be taxed in a parallel fashion, in my view, to traditional tobacco products, especially as it evolves towards young people.”

Of course the save the children angle did not just apply to Reuven, it seemed the Washington State Medical Association chose to become involved.

Susie Tracy, with the Washington State Medical Association, supports the change in the tax structure, citing reports of increased use among middle and high school students.

But the need to save the children did not seem to be backed up by any evidence she could offer that e-cigarettes were harmful to children or others.

Susie told lawmakers there have not been any studies done looking at how much healthier e-cigarettes are compared to standard cigarettes.

But what was truly a watershed moment for the legislature in its justification for taxing e-cigarettes as being health related to tie these products to tobacco to nicotine to e-cigarettes it seems that even consumers and retailers of nicotine free e-cigarettes are worried what comes next.. Several e-smokers testified they use nicotine-free vapors and therefore should not face the tobacco tax.

It should also be noted that according to the Washington State Department of Revenue, approximately 40% of all cigarettes possessed in the state are untaxed bootleg smokes illegally brought into the state due to the high taxes.

Sources:

King5 News
Revised Code of Washington

By Darren Smith
The views expressed in this posting are the author’s alone and not those of the blog, the host, or other weekend bloggers. As an open forum, weekend bloggers post independently without pre-approval or review. Content and any displays or art are solely their decision and responsibility.